The number of Maryland homes under foreclosure threat nearly doubled over the past several months, according to new data, prompting lawmakers and lenders alike to propose a mandatory 135-day minimum between default and the foreclosure sale.
Lenders foreclosed on more than 7,000 homes in the third quarter, a 71 percent jump from the second quarter and a 640 percent increase from this time last year, according to figures from California-based RealtyTrac, cited by Department of Labor, Licensing and Regulation Secretary Tom Perez in a General Assembly committee hearing.
Perez said the spike is spreading into counties not previously affected ? including Baltimore City and Prince George?s County ? and isn?t likely to improve anytime soon.
“I compare it to a prairie fire because you can see it spreading,” Perez told members of the Senate judicial proceedings committee. “… We have some initiatives in place to stop the bleeding, but the problem is exceedingly troublesome.”
Perez presented the findings of a state task force organized by Gov. Martin O?Malley in June. Chief among the group?s recommendations are extending the foreclosure process ? which now could conclude in 15 days ? curbing mortgage scams and requiring foreclosure notifications to be personally serviced or posted on property.
Maryland?s foreclosure rate remains below the national average, according to mortgage industry representatives who blamed uninsured lenders for problems associated with exotic and unsuitable loans. As of the end of June, Maryland?s rate was .66 percent, compared with the national rate of 1.4 percent, according to Mortgage Bankers Association data.
Lenders told lawmakers the foreclosure process already takes about 135 days and costs banks an average of $68,000 per sale. About 65 percent of borrowers never contact their lender before a foreclosure.
“There are many, many, many notices sent and many attempts to communicate because it?s just good business,” attorney Mark Wittstadt said.
But many mortgage lenders mischaracterize loans as fixed when they actually adjust, sometimes refinancing borrowers over and over and charging excessive fees each time, said Rob Strupp, a director at the Baltimore-based Community Law Center.
Strupp estimated Maryland is on track to reach 15,000 foreclosures in 2007 and 2008, costing many families their primary asset.
“For homeowners, foreclosure leads to the loss of shelter and lowers their credit score, resulting in obstacles to future home ownership and rental opportunities,” Strupp said.
The task force recommended lenders send a copy of foreclosure notices to state departments that could mediate. Consumer advocates said the requirement would keep many homeowners from bankruptcy ? which is often the only way to stop a foreclosure sale.
